The latest regulatory update – January 2021

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Regulatory Update January 2021

In this issue we cover:

·      Implications of the end of the Brexit transition period on JMLSG Guidance

·      MiFID II reverse solicitation rules

·      FCA statement regarding Memoranda of Understanding with EU authorities

·      FCA reminder to firms to regularly review regulatory permissions

·      Market Watch 66

·      FCA portfolio letter regarding debt purchasers, collectors and administrators  

·      EU Commissioner sets out next steps in future UK-EU relations

·      Extended financial information timelines

You can find these articles and a searchable archive of all our previous articles at https://objectivus.com

Implications of the end of the Brexit transition period on JMLSG Guidance

On 14 January the Joint Money Laundering Steering Committee (JMLSC) issued a press release outlining the implications of the end of the transition period for JMLSG guidance. The most important news from the release was that although EU countries are now third countries there is no increased inherent AML/CTF risks of customers from the EU.

MiFID II reverse solicitation rules

ESMA’s public statement from 13 January reiterated:

  • Questionable reverse solicitation practices by some firms following the end of the Brexit transitionary period. Examples of these practices were where ‘I agree’ pop-up boxes are used, leading to clients to agree that subsequent transactions are executed on their exclusive initiative (recital 111 of MiFID II).
  • Every means of communication (phone calls, brochures, internet, press releases) should be considered to determine whether the client has been subject to solicitation or advertising in the EU.
  • Investment services in the EU without proper authorisation exposes service providers to the risk of administrative or criminal proceedings and that investors may lose protections.

FCA statement regarding Memoranda of Understanding with EU authorities

On 4 January the FCA issued a statement regarding several memoranda of understanding with ESMA and EU regulators, including cooperation and exchange of information.  

FCA reminder to firms to regularly review regulatory permissions

On 21 January the FCA issued a statement reminding firms to regularly review their regulatory permissions. The FCA reiterates its power to remove and cancel firms’ permissions if it has not carried on a regulatory activity for 12 months. Firms should notify the FCA of material changes and apply to make any necessary alterations to their permissions in a timely way.

New powers in the Financial Services Bill, which is currently making its way through Parliament, means the FCA will be able to act more quickly where they consider firms are no longer carrying out regulated activities. Notice can be served on the firm requiring a written response within 14 days. Subsequently, if the firm fails to respond the FCA can publish a public notice and may then vary or cancel the firm’s permissions.

Market Watch 66

Issue 66 of the FCA’s Market Watch series was published on 11 January and provided firms with guidance around telephone and electronic communications whilst alternative working arrangements are in place. Specifically, firms are expected to have suitable recording polices, controls and oversight in place.

Recording telephone conversations and electronic communications – SYSC 10A continues to apply. Firms are reminded that when popular third-party apps are used for sharing work sensitive information there can be issues around their monitoring.

Firms must take ‘reasonable steps’ to record telephone conversations and keep a copy of electronic activities falling within the scope of the recording rules.

Recording policies, procedures and management oversight must meet rules including their adoption for home working arrangements.

FCA portfolio letter regarding debt purchasers, collectors and administrators  

The FCA published a portfolio letter to directors on 18 January setting out its:

  • view of the key risks such debt firms pose to their customers or markets;
  • expectations of such debt firms in mitigating key risks; and
  • supervisory strategy and programme or work

Additionally, the letter reiterated firms’ obligations to treat customers fairly, provide clear communications, resolve disputes and complaints fairly and comply with the FCA Principles and its Handbook.

EU Commissioner sets out next steps in future UK-EU relations

On 25 January Mairead McGuinness (EU Commissioner for Financial Services) delivered a speech which, amongst other things set out the next steps for UK-EU relationship in the financial services sector.

Ms McGuinness envisages a framework similar to the existing one which the EU has with USA, including a voluntary structure to compare regulatory initiatives, the exchange of views on international developments and discussions on equivalence-related issues. She also emphasised that restoring the UK’s market access rights and constraining the EU’s unilateral equivalence process, were not negotiable.

She also stated that equivalence assessments of the UK would use the same criteria as all other third world countries.

Extended financial information timelines

The FCA and FRC recently issued a joint statement reminding firms that more time has been provided to ensure that published financial information remains at the same high quality in light of the Covid-19 lockdowns. Specifically:

  • listed companies have an additional 2 months to publish their audited financial accounts;
  • there is in place a 3 month extension for filing those accounts at Companies House; and
  • flexibility around the conduct of AGMs

Firms should bear in mind that they have continuing obligations with regard to inside information as set out in MAR.